Post-Covid worldThe unorganised sector needs a big boostSOMASHEKARA GRNSOMASHEKARA GRN
Post-Covid worldThe unorganised sector needs a big boostSOMASHEKARA GRNSOMASHEKARA GRN1/2
Improving lives of poorest must be the measure of India’s progress, rather than ease of doing business for global investors
The Covid virus’ second strike in India has revealed both bad and good sides of the country. Oxygen tankers flown from other countries for patients in the capital city of a country that sends rockets to the moon is clearly bad. Not enough doctors and primary-care facilities for patients in villages in a country that has some of the finest tertiary-care hospitals and surgeons in the world, to which patients come from other countries is bad too.
Fortunately, mixed in with tragic stories are tales of remarkable compassionate work done by citizens and civil society organisations in communities.
Why was India harmed more than other countries during the pandemic? Why was the country not better prepared? While immediate attention must be on relief, the country’s policymakers must also go back to the drawing board to understand the root causes of the poor shape of public health systems and the fragility of the economy in which millions more have suffered life crises from the collapse of their livelihoods than have been harmed by the virus itself.
The mistakes lie not only in the present government’s policies. They are failures of economic policies followed for decades by several governments.
Caring for one’s family, and the people in one’s own neighbourhood, is natural, and good human behaviour as many citizens have demonstrated in the crisis. Helping others to stand on their own feet is good, too. The ability to stand up on one’s own feet is the essence of growth, of individuals and nations.
It should be a matter of great concern to policymakers that 75 years after India’s independence, many millions of its citizens’ lives are so fragile, and that the country must depend so much on other countries for basic needs. To be ‘ atmanirbhar ’ (self-reliant) is a good thing. India must become more self-reliant, not less.
However, the school of economics that has dominated public policies internationally, and in India, since the ‘Washington Consensus’ of the early 1990s had declared self-reliance as taboo. It twisted the desirable concept of self-reliance into ‘protectionism’, which is taboo in free trade economics.
Modi’s government came to power in 2014 on the back of the ‘Gujarat model’ of development. Two eminent trade economists, Jagdish Bhagwati and Arvind Panagariya, champions of the Modi model, insisted that India must grow its GDP faster, for which it must open its trade further and reduce regulations for investors. They criticised Amartya Sen and Jean Dreze for advocating more government attention to public health and education, and even called the latter’s philosophy of development ‘anti-growth’.
Sen and Dreze had argued that the country’s economic growth was not sustainable if more investments were not made in human development. They explained that China’s rapid economic growth, which India’s leaders envied, had followed decades of government investments in health and education. The ‘free trade and deregulate to grow’ economists had it backwards, they said.
Chinese super-fast trains had followed investments in human development; human progress will not trickle down from investments in super-fast trains the Modi government was proudly promoting.
India had failed for decades, even before its economic policy liberalisation, to build up infrastructure for public health and education. Along with freer trade came the other ideology of the Washington Consensus — that, government is bad, private is good.
Push for private sector
With this ideology, the private sector was promoted as the solution for public services also. The poor were compelled to turn to it at great cost, often driven into penury when health crises struck, because India did not have a universal social safety net — a very ‘socialist’ idea, untenable in the “minimum government” paradigm of the Washington Consensus.
Life for those on lower rungs of the economic ladder became even harder when good jobs, with adequate wages and security, became harder to come by with policies to promote ‘flexibility’ in labour markets to improve ease of doing business.
India must reform its economic policies and strengthen its institutions to improve the ease of living of its citizens, especially the poorer ones.
Their numbers have increased by several millions during the Covid crisis, according to economists, when millions, who were clinging onto some jobs and incomes without any social security before the crisis, fell again.
Institutions are the rules of the game, written and unwritten, with which societies get things done. The rules, as well as the constitutions of the formal institutions set up to apply the rules, are founded on deeper-seated ideologies.
When the global financial crisis shook up the world in 2008, economists said they would search for a ‘new normal’. However, after the crisis, they returned to the old economics for solutions. When Covid shook up the world again in 2020, it became starkly clear that the world cannot carry on with the economic policy frameworks that have prevailed with the Washington Consensus.
The era of the ‘flattening of the Earth’, Thomas Friedman’s evocative metaphor for denationalised globalisation, is over. While the Covid virus recognised no national boundaries, it has forced nations to pull up their drawbridges against movement across their borders. As nations try to save their own citizens from the virus’ wrath, they are fighting each other even for vaccines and medicines.
Economic policies must be radically changed to make life easier for migrant labour than for migrant capital. The ease of living of India’s poorest people must be the principal measure of India’s progress, rather than the ease of doing business for international investors.
India must build public health and education systems ground up, in preference to world class universities and world-class tertiary care hospitals.
Large factories plugged into global supply chains will not contribute much to the type of growth India needs post-Covid. Policies must support the informal sector, and nurture small enterprises across the country that generate more employment with less capital investment.
Seventy-five years after its Independence, India is shining at the top — the rich at the top have done very well post liberalisation. Local solutions, even small solutions, collaboratively implemented by communities around the country — a ‘Gandhian’ economic idea — will make all of India shine.
The writer is a former member of the Planning Commission. Through The Billion Press